Fears of new property curbs sink shares in China, Hong Kong

  on August 02 2012 7:52 AM

China shares resumed their downward spiral on Thursday, hurt by steep losses for property developers that dragged down on the Hong Kong market, after state-run media reported there could be fresh curbs, which would hit the sector.

Poly Real Estate, one of the mainland's biggest developers, dived 9.2 percent in Shanghai -- its worst daily loss since April 19, 2010, right after Beijing announced a clampdown on the sector.

Thursday's decline was onshore Chinese markets' third in four days. The CSI300 Index of the top Shanghai and Shenzhen listings shed 1 percent. The Shanghai Composite Index slipped 0.6 percent, hovering near 41-month lows.

In Hong Kong, the Hang Seng Index snapped a five-day winning streak, falling 0.7 percent to 19,690.2. But it managed to close above 19,677.2, its current 200-day moving average, a technical level it has struggled with since mid-May.

"The move for Poly Real Estate today is something you don't see very often. The scale of its move down is very unusual," said Lee Wee-Liat, BNP Paribas Securities' Head of Asia Property Research.

"Beijing has been using rhetoric to control the physical market, so it's now up to the market to respond. If prices spike up any more from here, Beijing could be forced to do more," Lee added.

Thursday's losses in Chinese developers came in strong volumes, which were in contrast to lackluster ones elsewhere in both markets. Turnover in Hong Kong was 18 percent lower than on Wednesday, declining for the first time in five sessions. Volume in Shanghai stayed dire, some 13 percent below its 20-day average.

Poly Real Estate's loss on Thursday shaved its gains so far this year to 23.6 percent. Shenzhen-listed China Vanke lost 6.8 percent on the day, but is still up 16.5 percent in 2012.

In Hong Kong, China Overseas Land & Investment shed 3.4 percent, while China Resources Land fell 4.6 percent and Evergrande dived 5 percent.

On Thursday, the state-run China Securities Journal reported Beijing could implement more curbs on the sector after the eight teams Beijing sent to more than a dozen provinces in late July complete checks on implementation of property restrictions.

Chinese Premier Wen Jiabao said in comments reported by Xinhua on Tuesday, that Beijing will maintain its long-standing controls on the property sector to prevent a price rebound.

Shares of Chinese property developers have been on the decline since official data on July 18 suggested housing prices rose for the first time in nine months. A private survey on Wednesday showed that housing prices edged up for a second-straight month in July.

CSRC 2ND SHARE BUYBACK CALL REBUFFED

The weakness in Chinese property developers overshadowed the China Securities Regulatory Commission's second attempt in two days to improve market sentiment by urging companies to buy back shares.

On Thursday, the CSRC encouraged firms whose share prices have fallen below net asset value per share to buy them back, the China Securities Journal reported.

"I think the market is getting a bit numb to what the CSRC is trying to do," said Chen Yi, a Shanghai-based analyst with Xiangcai Securities.

Ahead of earnings, shares of Hong Kong ports-to-telco conglomerate Hutchison Whampoa slipped 1.2 percent. After markets closed, Hutchison posted a 78 percent drop in first half net profit, above expectations.

Prior to Thursday, Hutchison was trading at 12.1 times forward 12-month earnings, a 40 percent discount to its historical median, according to Thomson Reuters StarMine.

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